India's logistics players ready to reap the rewards of simplified tax system
Reforms to business taxes have drastically altered the outlook for India’s logistics sector, creating the greatest potential for ...
Third-party logistics is set to gain popularity in India later this year, when the government simplifies national tax rules.
According to Navneet Kakkar, director of Quick Silver Freight Systems, the introduction of a general sales tax (GST) will streamline interstate trucking services and allow forwarders to operate more freely nationwide.
“In July we will have the GST finally, after waiting several years, and that’s going to be a game-changer,” said Mr Kakkar at the WCA First annual conference in Singapore today.
“It will simplify tax collection, but it will also free the logistics industry because India has over two dozen states with a physical border control for the movement of goods.
“Currently, trucks have to wait to complete paperwork. So, shippers and consignees have to do a lot of paperwork and they must also have an individual tax ID in every state if they want to operate warehouses.
“Effectively, freight forwarders are not able to be third-party logistics companies. But with GST, 3PLs will become more popular.”
Mr Kakkar said his company was readying for GST with a new distribution system and warehouses.
“We’re also representing the commercial interest of overseas principals who do not want to set up an office in India, but still want to test the waters. We have a 3PL service tailor-made for customers who are looking at infrastructure projects,” he added.
Quick Silver Freight specialises in garment and footwear exports to the US and Europe, moving half a million pairs of shoes every month.
Like other Indian forwarders, the company has had to deal with the fallout of Prime Minister Narendra Modi’s sudden and unexpected decision to ban R500 (US$7) and R1,000 banknotes in a bid to counter corruption and money laundering.
However, Mr Kakkar said, the country would benefit long-term.
“We had a brief disruption in November. Now the money is back and digital payments are getting more easily accepted.
“Truckers had a problem for the first two weeks, as they had no money to pay for fuel. But e-wallets have become popular very quickly, so anybody can make small payments, even a few cents, for small purchases,” he said.
Meanwhile, Indian forwarders are also dealing with confusion over a new 4.5% ocean freight tax imposed on Indian importers. The tax came into effect on 22 January and is applied to all shipments imported into India which are ‘pre-paid’.
“It’s going to become a little challenging for our partners, and we want to make them aware that they have a liability to collect this tax from the shipper only if the consignee doesn’t agree to pay. But it’s generally the liability of the consignee.
“We will be able to help WCA members who need more information, as we’re talking with our tax consultants about coming up with the right strategy to comply.
“It’s the end-customers who are going to pay, so really it’s only a small inconvenience to us as freight forwarders,” said Mr Kakkar.